Closing Bell: Cybersecurity Stocks Surge, AI Safety Fears Loom 9/14/26

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1:12But first, here is your scorecard with 60 minutes to go in the trading session. Well off the lows of the session, the Nasdaq now down only a quarter of a percent, the S &P down 0.3 percent, and the Dow down about 0.2 percent. And that leads us to our talk of the tape with the 10-year yield topping 5 percent. It's backed off a little bit from that level, but what is at play for the Fed and Wednesday's highly anticipated rate decision? Big questions here. CNBC senior economics reporter Steve Leisman kicking us off today with whether Fed Chairman Warsh has the votes to hike. Steve. Hey, Leslie. Yeah, an analysis by Deutsche Bank of FedSpeak.

1:50It uses a large language model. It finds that 12 voting members of the Federal Market Committee are the most hawkish they have been in the five years they've been doing this study. On a scale of 1 to 10, with 10 being the most hawkish or inclined to hike, the analysis of Fed Communications gauges the 2026 voters as the most hawkish since 2021, a 7.2 score on a scale of 1 to 10. Deutsche found nearly all voters have become more likely to hike since the last meeting, and that notable rise in hawkishness is the beginning of the Iran war. The three dissenters for a quarter-point hike at the last meeting, Hammett, Kashkari, and Logan, they're seen as among the most hawkish.

2:30But importantly, Deutsche puts Fed Chair Kevin Walsh right up there with them. Governors Cook and Barr took sharp turns towards that hawkish wing. There aren't really doves so much as centrists that could go either way, like Governor Waller, New York Fed President Williams, Paulson from Philadelphia, and Vice Chair Jefferson. Now, the probabilities futures prices show 93 % probability of a rate hike this week, 80 % for a second hike in December, and even 68 % for a third hike in March 27. These probabilities are volatile. They change quickly with data or Fed speak, but they reflect where the market is thinking, what the market is thinking right now.

3:06The 10-year near 5%, along with the two-year more than 100 base points over Fed funds. It's a signal to the Fed that the market thinks rates should be higher. And Warsh has already said, Leslie, as you know, he's looking for those signals from the market. He has indeed. And the market is giving him pretty volatile signals. So we'll see how he digests those along with the committee. Steve, thank you. Let's bring in our panel, MetLife's Drew Mattis, Ned Davis Research's Ed Klisold and Northwestern Mutual's Matt Stuckey. Thank you all so much for being here. Drew, why don't we start with you? What's your expectation for this week with the Fed?

3:42Do you think we see a hike? I do think we see a hike. Do we think one's necessary? No. But it seems like the chairman walked himself into a corner and he's going to be stuck delivering. I don't think he's as hawkish as actually that last graphic showed. But I do think that he's committed to kind of moving rates higher. And I think he's going to follow through with that. And I think you'll also see former chairman Powell join him in that. Ed, what do you make of the dynamic right now with regard to the 5 % yield? I mean, is the market doing anything with regard to tightening the financial conditions that may relieve some of the pressure on the Fed to do so?

4:23Yeah, well, this is what Walsh wants the market to do. And so the question is, is the tail wagging the dog somewhat? Will higher long-term rates enable the Fed to move a little bit slower? Yeah, I think that's the case. But I also think the market's sending a signal rather than the last three Fed shares where they were sending the signal to the market. So the move higher in yields, I think, gives the Fed a little bit more reason to raise rates at the September meeting. But it can mean they can go slowly with this cycle, unlike the 2022 cycle where the Fed had to be so aggressive. And that's what it really hurts equity markets when the Fed has to hike quickly and violently.

5:03one. Yeah, we have seen a pretty gradual increase in yields over time, not that big spike like we saw a few years ago. Matt, you also expect the Fed to hike this week. What do you think is some of the key driver for why we have seen yields move higher in such a gradual fashion? Is it where oil prices are in the geopolitical situation? Is it what's going on with the deficit? Or is it the AI buildout and CapEx question, which, of course, has also come into focus this week with some of the commentary over the weekend? You know, I think the biggest driver of rates so far this year has just been a repricing of Fed expectations.

5:42You know, recall when we started 2026, about three cuts were priced into the forward curve. And it's the mirror opposite today where three to four hikes are priced in over the next year or so. And so that's not really a concern about the fiscal situation. In fact, if you look at the curve between the five-year Treasury and the 30-year Treasury that's actually compressed by about 60 basis points a year to date. So that kind of premium that you would expect investors to demand for longer-dated Treasuries just simply isn't there. You would expect that to be there if there was kind of major fiscal concerns that were escalating throughout this year.

6:15Additionally, higher oil prices are helping the inflation outlook, obviously. And so you put all that together, combined with a five-year-plus amount of time where the Fed's been above the 2 % inflation bogey, It's just time where the Fed's likely to move and the market's taking them there. You know, the two year relative to the effective funds rate is about 100 basis points above kind of where Fed funds is today. That's the highest that we've seen since November of 2022. And so the market is telling Chair Wars that it's time to hike. Drew, does the 5 percent threshold to you matter for equities?

6:50Is it a psychological threshold in any kind of way that would create or spur some sort of a downshift in prices there? Well, I would say that breakpoints do tend to matter. Whether 5 % is a breakpoint, though, is kind of an open question. I mean, yes, U.S. equities are down today, but globally equities were down today, and the U.S. market doesn't look as bad as a lot of others. But I do think, you know, what in my mind is troubling is kind of the feedback loop that was just talked about, which is, you know, we're expecting, you know, the Fed to hike interest rates because long end yields are higher.

7:27But long end yields are higher because we're expecting the Fed to raise interest rates. You know, not part of that calculation is how exactly is raising interest rates going to restrain inflation. And the reason we're not talking about that is because it probably won't. What do you mean by that? I mean that most of the inflation drivers in the economy are not interest rate sensitive. So if you take interest rates higher, maybe you'll hurt consumers. But if your plan is to get inflation lower by hurting consumers, what we're really talking about then is the Federal Reserve's got to come out and say, we need the unemployment rate to be 5 percent in order for us to be confident that inflation is going to go lower.

8:03And I don't hear people talking that way either. What should they do instead? Fed. Is there any sort of monetary policy solution or is it something that needs to be done more on the fiscal government side? Sometimes it's not a Federal Reserve issue. And so, you know, if I had my druthers, I'd have them wait. But I don't think they're going to. And moreover, I think they'll probably not only not wait, but they'll probably go more than once. Ed, what do you think happens if for some reason the Fed doesn't hike? It has been so volatile in terms of the likelihood of seeing a rate hike this week. What would that mean for the credibility test that everyone has been talking about with regard to Warsh's term at the top there?

8:48Yeah, the Fed has allowed the market to think that they're going to hike. So I think it would be quite a surprise if they didn't. Now, if if the press conference afterwards was more of a discussion about how they expect to do that in the near future, Maybe the impact would not be as great, but Warsh really does run the risk here of hurting his credibility because he came out so strongly in favor of the Fed focusing on inflation. It's not two point something. It's 2.0. The Fed's been, you know, the inflation's been above the Fed's target for over five years. And so to not do it now, I think, would probably start to get the bond vigilantes going even more so.

9:30You can see the long end of the curve back up some more, which is why we think they are going to hike. Yeah, we've seen that response function so far. Everybody sit tight. Anthropics looming IPO just got a lot more interesting, especially over the weekend, with some of the commentary from CEO Dario Amadei and the blog post and some of the interviews. A lot of complications here. Kate Rooney joins us now to break down everything that she is watching. Hey, Kate. Hey, Leslie. Well, as you know, as well as anybody, this comes right in the middle of Anthropics. IPO process CEO Daria Amadei has been calling now for the industry to pretty much pump the brakes on rushing out new AI models.

10:11In an essay over the weekend, Amadei proposed a three-step plan to slow down and then oversee the creation of the most powerful AI technology, often called the frontier of AI. He does ask for third-party evaluators, safety standards, and then international coordination as well. Amadei has pushed for some of this in the past, but there is some new urgency given the new panic around the risk factors. Last week, anthropic researchers first tweeted about this and the existential risk around all of it, saying that AI labs were, quote, gambling with our lives. And major AI leaders also rallied behind Amadei.

10:47That is extremely rare in AI to have this sort of consensus. You had Elon Musk, Sam Altman tweeting their support of Amadei. Very rare that these three would agree on that. I did speak to a bunch of people over the weekend who did argue that the safety push could actually help Anthropics IPO. Positioning the company as a possible responsible player here also may help reduce some of the liability risk and then being public would bring more transparency as well. Multiple investors told me the growth rate right now is still off the charts. They do expect the IPO to go forward this year. I've also confirmed with some sources that Anthropics has seen back-to-back quarters, at least of adjusted profitability, Leslie.

11:25Yeah, the biggest question mark is how you underwrite that risk. And it'll be so interesting to see what they say about that and the risk factors, whether it commands any kind of discount as a result of those liability concerns. But all unanswered questions that we have to just wait and bide our time for. Kate, thanks for following all the latest of that. Matt, how important is it that this Anthropic IPO, number one happens and is a success? Well, I mean, I think you're seeing the volatility of the market back and forth based on shifting sentiment on artificial intelligence. And Anthropic is a major piece of that.

12:01And so a successful IPO of Anthropic goes back towards swinging sentiment back towards the positive direction. We've been seeing the AI trade kind of fizzle out throughout the summer as momentum has rolled over somewhat. But with that has been And the fundamentals of AI, if you're just looking at rental prices of GPUs, those are near year-to-day highs. It just speaks to the ongoing capacity shortage that's out there for compute. And so for that to be the status quo through year-end and into 2027, you need capital. And the IPO and the capital markets need to kind of continue to supply that capital to the likes of Anthropik and the rest of the frontier space.

12:40Yeah, it's fascinating, Drew, because there was a lot of commentary over the weekend about whether or not the AI infrastructure trade would hold up. Given all of the comments over the weekend, we saw steeper declines toward the open, but they've come back today. I mean, a little bit of pressure, but nothing that would necessarily dent a potential IPO opportunity here. What do you think that tells you about the way that the market is pricing in these types of risks? and as a result, how well the AI trade can hold up from here? I think, you know, there's just so many different aspects of it, whether it's, you know, where does the value accrue?

13:18You know, what are the investments being made? How are they going to pay off? You know, I do think, you know, we're thinking about this like as the economy is on a hinge and the hinge is AI. And the reason it's important to us, actually, is because it's important to the equity market, and then the equity market's actually helping drive consumption. So if you look at the main drivers of the equity market, it's investment, which is AI-driven, and it's equity wealth effect into consumers, which is also AI-driven. And so I don't know what might cause a disruption there, but I do know a disruption there would be negative for U.S.

13:54growth going forward. Is concentration risk on your radar, Ed, in terms of just the importance of this trade working across not just the AI infrastructure upstream and downstream, but also what we were just talking about with regard to the wealth effect for consumers and the impact on spending as well? Yeah, so it's a little bit of a house of cards. I don't want to sound too alarmist about it. But you have in the top 10 stocks in the S &P, a lot of the ones we've been talking about today accounting for a record high percentage of the index. X in the U.S. is by far the largest stock market in the world.

14:33So if those companies run into trouble, you're going to feel it around equity markets globally. And because we don't have that nice demographic dividend of 150 ,000, 200 ,000 jobs a month being added each month, and Americans like to spend, so they just spend the money that they're making. So instead, we're beholden to CapEx and then the high-end consumer, which, again, is back to the stock market, back to those 10 stocks. So it doesn't mean it has to end tomorrow, but the writing's on the wall for how this economic cycle is going to eventually end. And that is when this CapEx cycle does slow down.

15:09Unfortunately, the rest of the economy is probably going to slow down with it. Matt, if you look at what's going on in the banking complex today, you've got Bank of America down nearly 6 percent, Goldman down 4, Morgan Stanley down 3. Brian Moynihan, the CEO of B of A, on the tape, speaking at the Barclays Financials Conference today, talking about some guidance in terms of sales and trading, investment banking for the third quarter looking a little lighter than the market may have anticipated, and people extrapolating that. How much of that do you think is due to, say, financing costs increasing, concern around AI build-out, some of the big themes that we were talking about today and the impact on the banking system?

15:48Yeah, you know, the update we got from Bank of America today was really about their trading revenues. And that's not as directly correlated with what's happening in terms of the investment banking business and the ongoing ability to secure financing to supply to the frontier model makers. You know, what he also pointed to, though, was continued strength in net interest income, which if you're looking at the major source of high margin revenues for banks, it is that kind of line item there. So, you know, really what we've seen throughout this year is a re-rating higher in the money centers based on the capital markets renaissance.

16:21You know, strong fee-based business growth combined with continued strength and NAI growth. And maybe that trading revenue line item is starting to moderate a bit. But continued strength, I think, is probably the message that you're going to hear throughout the conference at Barclays. Yeah. And obviously, tough comps from last year as well is something to be noted with regard to sales and trading and why this upcoming quarter might be a little more muted, depending on what we see. Still pretty early days there. Drew, Ed, and Matt, thank you so much. Appreciate your time today. Let's send it over to Seema Modi for a look at names in tech that are outperforming today.

16:57Hey, Seema. Hey, Leslie. Yeah, the market does see cybersecurity as a winner should this AI slowdown manifest. Names like CrowdStrike and Palo Alto are up about 14 % at this hour. Bank of America says the cyber incumbents should benefit if the AI industry decides that a third party is needed to sort of implement the AI guardrails. Now, a slowdown in the frontier labs is also seen as good news for software on this idea that these companies will have more time to catch up on their AI native offerings. I would call out Salesforce, which you'll see, is outperforming ahead of its Dreamforce conference that is set to begin tomorrow.

17:33So another software giant moving higher is Palantir. Shares up about 3%. DA Davidson saying the company would be a great candidate to lead the AI code hardening effort and adding that it benefits from companies sort of pivoting away from the frontier labs and trying to create, again, their own native offerings using open-weight models, Leslie. Yeah, certainly a beneficiary potentially there, Seema. Thank you. We are just getting started. Up next, more on the AI sell-off and the backlash facing the industry. why AI leaders are now calling for self-regulation and what it could mean for the next wave of IPOs.

18:09Our tech panel weighs in. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments. Vantage Score safely broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market.

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19:54This isn't fees extra. New customer offer for initial plan term only greater than 50 gigabytes may slow when network is busy. See terms. Welcome back. Anthropic announced its confidential IPO filing three and a half months ago. And so far, sources say that it still plans to proceed despite some of these fever pitch concerns over safety. And that's because nothing we've heard in recent weeks, especially from CEO Dario Amode, is demonstrably different than what he or his peers have said before about the risks of uncontrollable AI and the need for industry-wide coordination. However, slowing down the pace of model development while simultaneously contending with unprecedented regulatory, political, and security risks, all while pitching investors what is likely to be a lofty price tag, is not an easy balance.

20:41The big question is how well the market itself holds up and whether it remains conducive to these listings, these types of listings. All the commentary over the weekend is putting a bit of pressure on the AI infrastructure space today, but not a major, major sell-off in a way that would derail some of these plans. And Anthropix seems to continue checking boxes toward its own listing, including selecting the NASDAQ as its listing venue, plus reportedly speaking with potential anchor investors, including NVIDIA. The betting market's moving in a big way on the timeline of the Anthropic IPO. Contessa Brewer has that for us.

21:18Hey, Contessa. Hey there, Les. What we're seeing here is that the odds of Anthropic announcing an IPO this year are running at about 85 percent when they're lumped in with other IPO candidates. But on the specific question, when will Anthropic officially announce the IPO, probabilities have taken a bit of a tumble since the company's CEO and co-founder had released that essay Saturday calling for the slowdown of AI development. The market predicting that Anthropic will announce before December 1st. Here you can see it right now. It's at 73 percent. But look how high it was. And then we saw it dropping.

21:50It fell to about 70 percent. And then the probabilities for an announcement before September, before November 1st, rather, are now at 58 percent. They had plummeted 20 percent on the release of that essay. The impact, by the way, wasn't just to Anthropic as well. If you look at the question of OpenAI announcing an IPO, the odds had reached a high in late May of 93 percent. And then look what happens. A steady decline all the way down to the release of that essay. They've been on a steep descent and just hit a low of 1 percent before rebounding now to 4 percent. That's the probability on OpenAI.

22:31So, Les, you're seeing a lot of action and a lot of movement on these markets. Contessa, do we know if those are roadshow launch dates, listing dates, pricing dates? They say announcement. And then when you look at the closing on that, you have to go back into the details. Remember, on all of these markets, the devil is in the details. By what source? What does official announcement mean? All of that matters when it talks to a closed market. But considering that it's still open and trading, it's not a closed deal. Yeah, fascinating. Contessa, thank you so much. Let's talk more about the AI race to go public.

23:06Joining me now, big technology founder Alex Kantrowitz. He's a CNBC contributor. You have been all over this horse race, this saga, the question about IPO. Can a company go public in this environment? I think it's a really big question right now. If you are at the heart of some of these big existential questions concerning safety and regulation and politics and what it means for society, I mean, is it one of those things where it's just as simple as, well, if the market holds up, they can go public? I think it is. And OpenAI has said, you know, we're not going to go public this year. So Sam Altman over the past couple of days has said, we're not going to IPO in 2026.

23:42Maybe that'll happen in 2027. But I think Anthropics still can go public. I mean, obviously there are some concerns about what the technology can do, but its technology is not behind the most concerning hack, which is OpenAI's hack of hugging face. And more than that, even if you took the current models, Anthropics still has a very sizable business. So you can slow down the release of the upcoming models, and there's a question of how slow that's going to be. But even if you do that, the current technology, I believe, is strong enough that you can make a business case to Wall Street and still go out this year.

24:16They've already signed up for billions of dollars worth of compute, so their expenses are kind of known. If they slow down the pace of model releases, what does that mean for margins, if anything? Yeah, well, it could hurt the margins, right? Because you're ultimately like the smarter you make the AI, if you're running it on the same underlying technology, you're going to be able to make more money. So that could hurt margins. But I still think they'll be able to do pretty healthy margins with the technology that they have today. That wouldn't be a major concern to me. We also have Lo Tony, Plexo Capital founding, managing partner with us as well.

24:51Lo, do you feel like this is an inflection point Or is this just part of the journey that these IPOs have been on with regard to kind of balancing all these competing pressures while looking at the market and saying maybe the window is actually open, regardless of the noise that's out there? Yeah, it's a great point, Leslie, because when we look at the actions that Daria was taking, he was clearly planning on going through the IPO process to prepare, while at the same time raising these issues with his peers in the space to determine how to best address the issues. And so, you know, I think this is what we're going to see that's going to be new, because as we know, typically technology outpaces the ability for regulation.

25:38In the past, we've seen regulation look through the rearview mirror and things like social media. But now we're talking about AI, which, as President Trump has made very clear, this is more of a national security interest. So I think ultimately we will see Anthropa go public. Maybe it'll be this year or maybe it gets pushed out to next year. What is slowing down model development mean for CapEx? I ask, Alex, because an IPO is seen, especially in this environment, is a necessity. You're raising equity capital. It potentially unleashes access to investment grade credit ratings, which is something that they've been reportedly lobbying, or at least their bankers have on their behalf in order to access even more and deeper markets at cheaper cost of capital.

26:24So, you know, if you're slowing down the pace of development, does it make those liquidity events as necessary, as pressing? Or can you kind of also maybe take a pause and say, maybe we should give this security stuff priority and the financing will happen when it happens? Yeah, I think the liquidity events are still extremely pressing. And that's because there's so much demand. Again, talking about the current AI offering that's out there today, there is so much demand for this stuff that you want to be able to meet the demand. And so most of AI is moving towards inference or using the models, not training the models.

26:58Now, of course, if you're a company like Anthropic or a company like OpenAI, you want to do both. You want to train and you want to provide for inference. But Anthropic in particular has been singled out by those using this technology as a company that needs more compute because it has these models and people aren't able to use them to the extent that they want. So they definitely have to continue to pursue this liquidity to be able to meet the market. Or what's going to happen is people are going to go over to OpenAI. Yeah, yeah, it's fascinating. Guys, stay with me. We are getting some news out of Washington.

27:27Megan Casella has that for us. Hey, Megan. Hey, Leslie, we just learned that President Trump met privately last week at the Republican National Convention with Sam Altman of OpenAI. This comes according to MSNOW, who's citing three people familiar with the meeting. They say this was a private meeting that happened backstage at that conference in Texas, and they only got a brief overview of the discussion saying that it was centered on AI and its growing power, and that Altman was the one who requested the meeting with the president. Now, Leslie, of course, this comes as we're hearing very different things from both of these men on AI.

27:57Altman joining other AI executives this weekend and saying there is a need to slow down and to pace the frontier. But everything we've heard from President Trump since then has been very different, really dismissing all of these concerns. He called them a hoax today. He says the only regulation or the only guardrails that the U.S. needs is a strong and smart president, referring to himself, also saying it's just a sick conspiracy going on against AI and data centers dismissing the idea or dismissing the fact that these concerns are coming from the AI leading researchers and executives themselves.

28:28But now we know that President Trump and the OpenAI chief met privately just last week. Leslie? Interesting insight there, Megan. Thank you. Lo, as we think about the political implications of this, you'd be kind of hard-pressed to think of another industry or another scenario where it's the companies themselves that are calling for additional regulation, that are calling for their own growth to be slowed, while the government is saying, no, we have to win this race, keep going, keep pressing forward. How do you think this all transpires? Wow, it's so fascinating to watch this play out in real time, because what we're seeing is a prisoner's dilemma, not only within the companies within the United States, And this really comes down to a pace versus race.

29:12And so we need the companies to come together so that everyone can agree. And that looks like it's happening within the companies within the United States. Now we have this separate issue around a prisoner's dilemma contextualized within the framework of AI and U.S. leadership being important for national security. So now the prisoner's dilemma shifts to a focus between the U.S. and China. And so can we get China to agree to coordinate with us again to pace the release of these models? Or does China decide, hey, this gives us an opportunity to actually race ahead? Yeah, there's also this question, Alex, about product liability.

29:56If one of these AI agents goes rogue, who's liable? What does that mean from a risk factor standpoint as you're trying to figure out what the appropriate discounted cash flow model looks like for a company like this? I know it's likely not based on that. But in terms of as you think about TAM relative total addressable market relative to some of these risks that would be costly, potentially in areas that are not yet settled law, what does that mean in terms of needing that regulation for investors? Do they need that to feel comfortable or are they already comfortable because these companies have gone through so many rounds of private investments that it's kind of already been figured out privately?

30:38Well, I don't think investors are going to be happy if there is any regulation that happens here, because if we've seen the way that Congress has tried to regulate tech in the past, they've been unable to do it. The rules and regulations around tech is just so difficult, and Congress's knowledge is so limited that when they try to tip their toe in the water, they don't do anything. They have some good YouTube moments in the hearings, but then when it comes time to put pen to paper, they really struggle to do it. So I don't think we're going to see regulation coming from the U.S. Congress. But the thing is, what you could see is a different type of regulation.

31:08And that's something that happens on the municipal level, the local level and the state level, where all three levels are considering bands of data centers. Right. And so it is remarkable that these CEOs are coming out and saying, hey, you know, things could be dangerous. Let's put these frameworks. But the frameworks that they're proposing and the federal action that they're thinking we should take is just something that's not very realistic. We're probably not going to see Congress enact laws like this, but they're getting out ahead of it because what they see very clearly is that the data centers, which they need to grow, are under threat.

31:41You know, this week, you're going to see Bernie Sanders and Steve Bannon get together in an event to talk about data centers and AI. That's the type of things we just don't see in the United States often. But that sort of bipartisan agreement about the risks of AI is happening now in the shadow of, you know, a potential IPO. Yeah, they're the physical manifestation of all of these fears, whether it's job loss, whether it's security implications or the decimation of society, as certain researchers have suggested there's a potential 10 percent probability of. I mean, it makes sense why you would see these these types of political leaders come together on on this issue.

32:17And I kind of wonder whether raising these concerns about safety low attenuate these concerns. Yeah, they do. And it's a good point. I mean, this is the challenge that we face right now, because not only are we looking at the importance within the United States of leadership with AI, and there are many different ways that we can address it. I mean, Dario laid out some both in his blog post as well as in his interview on CBS. We could look to further tighten the restrictions on the components that are necessary to be able to provide that AI model development and restrict those to China. But we have this other important issue as well, which really requires some attention on why it's important to think about U.S.

33:04leadership and AI. Basically, if we look at the AI trade, it permeates throughout the entire economic ecosystem right now. So this is definitely front and center. And you're right. We do see some strange bedfellows when it comes to looking at folks from both the left and the right coming together, which I think shows the importance. We also saw this importance percolating in how there were many communities that were really giving backlash against data center development. If we really start to break that down and unpack it, what we see is not so much not in my backyard, but I think it really spoke to this issue that we're facing now, which is this fear of AI and how it should be regulated.

33:50Yeah, absolutely. Alex Lowe, thank you both so much for coming on on a very important inflection point, it really feels like, with regard to AI and its role in society and the markets. Coming up is a rate hike inevitable. Our next guest says one is likely coming this week. He'll break down how he's positioned. Closing Bell will be right back.

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35:38Term only. Greater than 50 gigabytes may slow when network is busy. See terms. Welcome back to Closing Bell with the 10-year yield topping 5 % today for the first time since 2023. Where are the best opportunities in the market right now? And joining me now to discuss is Carson Group, Chief Market Strategist and CBC contributor Ryan Dietrich. Ryan, I think a lot of people see yields at that level and they wonder what can go wrong. You are focused on what can go right, which to me suggests you think it will maybe stay at these levels if it's worth repositioning your portfolio? Well, we do, Leslie.

36:12Thanks for having me back. Appreciate it. A little context, right? In the late 90s, we had nominal GDP running about 6%. That's ballpark where we are right now. Last quarter was 8 % nominal GDP, but we averaged let go just a hair under 6 % those final four years of the 90s. Now, I get it. All times are different, yes. But at Carson, we've said all year. This is an inflationary growth environment, meaning yields are going to go higher. It's going to be sticky inflation, maybe 3, 3.5 % inflation. But you know what? The economy is going to do pretty darn good and this bull market's alive and well.

36:41So we still think you want to be overweight stocks, underweight bonds, and yields will probably keep working the way higher here. And so far, we haven't seen much in the way of credit stress. Do you expect that to continue? Well, I think so. I mean, listen, we watch it every day. What do we know, right? We know high yield spreads are showing virtually no stress. I mean, when high yield is outperforming kind of intermediate term bonds on a relative basis, the way I learned it, that means there's no monster under the bed. I mean, early this year and early 2025, before all the trouble started, we saw stress in high yield credit markets.

37:14We're not seeing that yet. And then, you know, I mean, there's different ways to look at this, but one more, what's really kind of lagging just last week on a weekly closing basis, on a relative basis, we had utilities and staples both closed like their lowest levels ever relative to the S &P 500. Those are defensive areas. If they're not getting a bid, I get the market's choppy. I get all the headlines. We understand all that. But that's probably a sign this market wants to continue to work its way higher, not lower. At what level are you concerned that it does start to become more of a pressure point for the consumer, for their credit card bills, for buying a house?

37:47I mean, is 5 % that level, or does it just depend on how long it stays there? Yeah, I kind of think it depends how long it stays there. I mean, again, I think we work our way higher still. I mean, we might go up to 6%, you know, over the next year or so. We don't think that's like the end of the world. I mean, consumers, there are fits and starts. When you look kind of peel back the onion, you know, the consumer is actually still in pretty good shape. Balance sheets are in some of the best shape they've been in a couple decades. I mean, yes, there's a lot of debt, but there's also a lot of equity.

38:13And we can go down, you know, the K-shaped economy path. We understand the issues that are there. But put a cherry on top here. The labor market, we've been saying for several months, labor market's better than people give it credit for. With that data we saw last month, we think that's a start to probably, you know, maybe say 50 to 100 ,000 jobs. I know it doesn't sound like a lot, but that is more than enough in our economy now to keep things going and bring back that consumer confidence, which is still really low every time you turn around. Yeah, just to reiterate that, put a fine point on it.

38:38You've got the city CFO, Gonzalo Lucchetti, speaking at the Barclays Global Financial Services Conference right now. And he says consumers continue to spend. Consumers continue to pay their bills. The simplest version of it. And he said they're seeing about 6 percent year on year spending momentum. So, you know, that seems to be the case from the financial services perspective as well. I know you are overweight financials potentially in part due to that. Ryan, thank you so much. Thank you. Coming up, Apple and OpenAI going head to head in court today as a high stakes trial kicks off. We'll bring you the latest straight ahead.

39:14Closing bell. We'll be right back. Welcome back. Apple and OpenAI facing off as a high-stakes trial gets underway today. Mackenzie Cigalos has the details for us. Mac, as if there wasn't enough AI news already today. And today, OpenAI telling a court that its first consumer device is not coming anytime soon, pushing back on reports that it could arrive by the end of this year. That is a departure from the timeline that CEO Sam Altman had previously floated, where he said that OpenAI already had prototypes in hand and was considering previewing a device this year. Now, Apple, meanwhile, pushing for immediate access to the startup's product schematics, arguing that it needs to determine ASAP whether its trade secrets are being used in OpenAI's hardware work.

39:58Now, the judge didn't give Apple what it wanted today, instead telling both sides to narrow their requests and come back with a joint plan for what should be exchanged. So Discovery, very much shaping up to be the real battleground in this case. Apple wants access to devices and accounts that may contain its trade secrets, records showing who saw that information, plus OpenAI's actual hardware designs. OpenAI saying Discovery has to go both ways, and accused Apple of taking a shoot-first, think-later approach. The next step here in this legal battle is October 14th, when both sides return to court, And the judge just starts deciding what Apple and OpenAI will actually get in discovery.

40:37Leslie? Fascinating, Mac. Thank you so much. Mackenzie Cicalos for us. Up next, the 10-year hitting 5 % in housing stocks are feeling the heat, while the surge in yields could deal another blow to an already challenged housing market. That and much more when we take you inside the market zone. Welcome back. We are now in the closing bell market zone. Mike Santoli and Wilmington Trust Megan Shue are here to break down these crucial moments of the trading day. Plus, Diana Olick is watching mortgage rates as the 10-year yield tops 5 % and fill the bow with more on what fuel prices mean for the travel industry.

41:12Let's go over to Mike Santoli. Mike, really interesting day today. A little bit more pain earlier in the morning and things have bounced back a little bit. Yeah, and once again, Leslie, the pain has been localized. That's what this market does. It was another rotational rescue. There is a lot of pain in semiconductors all along the AI hardware food chain, but it's being made up elsewhere. Obviously, Mag7-type stocks are working. You do have that relief coming after the spike above 5 % in Treasury yields, which also seemed to lend some downside in oil prices. Those two assets have been very connected.

41:47And so when you've got people buying bonds at the 5 % handle, it seems like it also added to some pressure to the downside. So that enabled a little bit of strength in the equal weight S &P. So we are kind of where we were. We're still in this range. The VIX under 17, even with all of this noise around it. So we'll see if it can hold again and if we can get some clarity on what this all might mean in terms of the AI build-out trajectory. Yeah, weathered some remarkably scary commentary over the weekend. I think there were some questions about how it would open this morning. And it looks like it'll close down a little bit.

42:19We used up all the worry on Sunday, I think. Yeah. Yeah, that's why it's probably good to release that kind of news on a Saturday. Mike, what is coming up on overtime today? Yeah, we'll get into all the issues. We have Henry McVeigh from KKR give his perspective, slightly longer term view on what it all means. All right. Looking forward to that, Mike. Thank you. Let's get to Diana Olick with the latest on mortgage rates as the 10-year hits 5 percent today. Diana. Well, Leslie, the average rate on the 30-year fix jumped five basis points this morning to 7.17 percent, according to Mortgage News Daily.

42:53That is the highest level since January 2025. Of course, mortgage rates loosely follow the yield on the 10-year, which, as you said, crossed over 5 % to a multi-year high. Mortgage rates are now up 29 basis points in just the past week. Stocks of the big builders, however, they held on, mostly in the green on the day, especially after yields fell back a bit this afternoon. The same cannot be said for Digital Realty and Equinix, the two big data center REITs. They're both down between 4 % and 5 % on all the news of a potential AI slowdown. And I'll have exclusive reaction on that from Digital Realty CEO Andy Power in tomorrow's free Property Play newsletter.

43:31Make sure you're signed up, cnbc.com forward slash Property Play. Leslie. I am signed up and I'm looking forward to that one, Diana. Thank you. Let's get over to Phyllabeau, taking a look at what these fuel prices mean for airline stocks. Well, a mixed day today, Leslie, in terms of how the airline stocks did. But this has not been the sector to play since the beginning of August. In fact, if you look at the four largest airlines here in the United States since basically August 2nd, August 3rd, somewhere in that time frame, you see that they're down anywhere between 8 and 13 percent. And here's the reason why.

44:05Look at what JetFuel has done this year. Remember the spike in March after the prices came back down? People said, OK, well, we've seen the worst of it. That's not the case. They just hit an all-time, or year-to-date high, I should say, just a few days ago. Still remain elevated. That's why the ARCA index, it's down 15 % over the last three months. Not a surprise here that you see the airline stocks moving inverse to what we see with the jet fuel prices. Leslie, the thing to watch is that we will hear from a number of executives from airlines this week. Do any of them change their guidance for the third quarter?

44:40That's what we're going to be watching. Yeah, my guess is at least some of that will be passed on to the consumer in terms of ticket prices. So thank you. Let's bring in Willington Dress Megan Chu to look at the close today. So you recommend that investors stay overweight equities but brace for a normal market pullback in the coming weeks. What's the key driver of that? Well, well, Leslie, when we had markets hit highs a couple of weeks ago, really, we're not that far off of those. But we had three things that were really supporting the market. AI investment cycle and earnings, the potential for the Fed to be on hold or even to have a dovish pivot towards rate cuts, and then some reduced tension in the Middle East.

45:22And all three of those have sort of crumbled a little bit, if you will. But I think the underlying economic story is intact. We have a bit of a Goldilocks economy where we have solid economic data. We do expect continued disinflation, especially as you think about new base effects as we move into 2027 that should see the core PCE move materially lower. And with that, we think the Fed could be in a position to reverse the rate hike that we're likely to get this week. So I think if you think about a normal year, a 5 % to 10 % correction is the norm. That is kind of the seasonal period that we are in right now.

46:03post-earnings tends to create a bit of a vacuum. But I think as we move into and beyond midterms, we're going to see the market recover and sentiment return into the end of the year. Yeah, it's certainly interesting times and obviously some key questions as to whether all of those factors are priced in at these levels or whether there's more pain potentially to come. Megan, thank you so much, Megan Hsu, for us taking a look at how we are facing the day

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